Pandora opens its gates for advertisers

Internet radio service Pandora has developed a large enough following in New Zealand, a year after its local launch, to start selling advertising to Kiwi businesses, founder Tim Westergren says.

"A year on, it feels we have the critical mass to reach out to the advertising industry."

The Californian company entered the New Zealand and Australian markets last December and they remain the only countries outside the US where the service is available. People can listen free of charge to music from 100,000 artists through advertising-supported adaptive "radio channels" that learn their listeners' tastes, or pay a $4.84 monthly subscription to skip the ads.

Westergren said Pandora had attracted 3 million paying subscribers and 200 million registered users in the US. Revenues jumped 56 per cent this year to US$427m and the company has seen its stock market valuation soar to US$5.7 billion. Twenty per cent of its US revenues come from subscriptions and the remainder from advertisements.

Unlike streaming music services Rdio and Spotify, Pandora does not let internet users listen to specific tracks on demand. It has been able to pay lower royalties to record labels, as it is therefore less likely to cannibalise their other sales. But Westergren said it was, nevertheless, finding it hard to strike licensing deals covering new overseas markets.

"Our hope is as we demonstrate the consumer enthusiasm and the benefits to the artistic community in New Zealand and Australia, where rights holders were progressive, it will validate their decision and persuade rights holders in other territories to do the same."

Some artists have complained that online music streaming services pay only peanuts in royalties to musicians. But Westergren said Pandora paid out 55 per cent of its revenues last year, and much of that income came from people who would not otherwise spend it on music.

Westergren said Pandora considered launching an on-demand service on "an ongoing basis", as it was "an adjacent capability" and people had requested that. But it had decided for now that its value lay in helping people discover new music.